Shadow Inventory Threat Wanes

The number of homes in “shadow inventory” dropped from 2.6 million in October 2011 to 2.3 million in October 2012, according to a new report from CoreLogic.

Shadow inventory refers to the supply of homes that are in foreclosure or have seriously delinquent mortgages but are not yet on the market.

Many housing experts once predicted that the shadow inventory would cause overall inventories to skyrocket and place downward pressure on home prices. Yet an increase in short sales and loan modifications have helped to lessen the impact, analysts say.

“The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent,” says Anand Nallathambi, president of CoreLogic. “We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold.”

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